The economy’s self-correcting mechanism appears to be more efficient at curing
A. recessionary gaps by reducing price levels.
B. inflationary gaps by reducing price levels.
C. unemployment by reducing wage levels.
D. inflationary gaps through inflation.
Answer: D
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In the long run, the real interest rate is 3 percent, real GDP grows at 4 percent, velocity is constant, and the quantity of money grows at 6 percent. The nominal interest rate is
A) 3 percent. B) 10 percent. C) 5 percent. D) 6 percent. E) 4 percent.
If the typical firm’s minimum average variable cost is $10 at an output of 50 units, if marginal cost is $20 at 70 units, and there are 1,000 firms in the industry, sketch supply curves for the typical firm and for the industry as a whole.
What will be an ideal response?
Suppose a monopsonist wants to hire more workers. If it has to pay the same wage to all of its workers, the:
A. marginal factor cost will fall while the wage will rise. B. wage will fall while the marginal factor cost will rise. C. difference between the wage and marginal factor cost will become smaller. D. wage and the marginal factor cost will increase.
Which of the following most closely approximates the conditions of a monopolistically competitive market?
A. The market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product. B. The restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers. C. Local cable television service, where a licensed supplier competes with firms offering satellite service. D. The market for jumbo aircraft, where one major domestic firm competes with one major foreign firm.